Buy Big and Stay Safe

For now, the best thing investors can do is buy big companies that are in
all the big global markets, because most of the growth for years to come will
not come from the US or Europe, observes Keith Fitz-Gerald of
The Fitzgerald Group.

Gregg Early: I'm here with Keith Fitz-Gerald, chairman of
The Fitzgerald Group and chief investment strategist of Money Map
Press.

Keith, you've been in the market for 25 years. You're an expert in the global
markets. Not only has the United States come off a big election, but China also
had a major election. Where do you see the risks or the advantages for investors
at this point?

Keith Fitz-Gerald: That's a very important question. I think
that investors need to put this into context with what's going on in the bigger
scheme of things. There's a lot of angst on both sides of the ocean.

Will Obama be good for us for another four years? Will he be bad for us for
another four years? I encourage people to put the rhetoric aside. I think that
Obama's victory suggests a couple things about the market.

It's a time to be stable, defensive, and ironically, compromise with regard
to what you may have had as historical expectations. What I mean is, it's time
to think about the big global stocks. Those are the defensive mega caps that
have the experience needed to manage real growth and challenging economic
conditions around the world. Most typically pay high dividends that offsets the
risk of ownership, and I think they are far more stable than non-dividend-paying
alternatives.

Small-cap investors better be careful, because I think we're going to have a
volatile market in the next four years. And unless the small firms have
something like a unique patent or a long-term government contract, that
volatility is going to be more than most individual investors are prepared to
accept. Most pay no income either, so it's worth pointing out that they're a
crap shoot in today's environment.

Gregg Early: You're talking about more of the US-based
global companies, or are you talking about things like Nestle
(NSRGY)
or Diageo (DEO)?
I mean, firms that have broad global exposure, not just into emerging markets in
particular, but everywhere?

Keith Fitz-Gerald: Well, I think that's an interesting
point, and it's worth noting. The real growth is still going to come from
outside the United States.

This is a numbers game. People want to dismiss this, but to do so is to
really ignore the basic laws of probability and population trends on this
planet. There are creditor nations around the world that are growing at double
even triple our rates. Even now, many of them are led by China, so it's not just
China that matters.

You can invest directly in those markets, in which case you have to stomach
the volatility and you have to have an appropriate timespan. You can also invest
right here at home or through European exchanges in big global companies like
ABB (ABB),
for example, out of Zurich, or GE (GE),
Procter and Gamble (PNG),
or McDonald's (MCD).
All of them are moving into Asia.

It's the single biggest capital expenditure area for them because they know
that's where the growth is. They expect 20%, 30%, 40% growth in the next decade.
To me, that's a far more compelling statement of investment priority than
investing in Europe or the United States, where you're going to be trapped with
the legacy of debt for ten or 20 years.

Gregg Early: I've also heard that the demographics in China
are such that because of the low birth rates, the one-child policy that they had
for so long, that as the middle class grows they're contracting out work to
other Asian nations, which means that their economies are growing, because now
China is contracting out work.

Keith Fitz-Gerald: Absolutely. You know, this is the natural
order of things. People are betting on China's fears and on their failure. What
they ought to be doing is looking at basic history and betting on their success.

What China is doing with the surrounding nations is the same thing that we
did with Mexico and Canada, and what Germany has done with much of Europe.
They're beginning to farm out their contracted labor. They're farming out their
production capacity. They're beginning to engage in regional trade, all of which
makes that segment of the world more valuable than it has been in the past.

We've been down this road before. Countries that go down this path typically
do it because they have pent-up demand and because they have the capacity to do
so. Warts and all, problems and all, change in leadership and all, funny books
and all, China is in fact is still going to play a very important role in our
world's future.

Gregg Early: Where does Japan fit into
this picture? The GDP just came out. It was down last quarter. Are they still
restructuring? There was hope that they would be getting out of the funk that
they've been in for so long. Is that still a hope?

Keith Fitz-Gerald: Well, as you know, I live there and have
lived there for part of the year every year for the last 20-plus years, so it's
a nation I'm intimately familiar with, personally and professionally.

I hear every year that this is going to be year of the Japanese recovery-this
is going to be the year that somehow the Japanese economic machine comes back. I
think that's a very encouraging thought. Unfortunately, it's not a realistic
thought.